Apple-Qualcomm Settlement Sets Stage For A 5G iPhone Next Year

The two companies are planning to work together again after dismissing several years worth of litigation against each other.

Until the surprise legal settlement between Apple and Qualcomm Tuesday, the launch of a 5G-supporting iPhone in 2020 had been under threat.

But that threat appears to have been removed by the agreement to drop all litigation between the two tech giants. The deal has Apple and Qualcomm entering a six-year patent license agreement as well as a multi-year chipset supply agreement. Apple will also make a one-time payment of an undisclosed amount to Qualcomm.

[Related: Apple’s Future Plans And Products: 5 Things We Learned This Week]

"Ultimately, Apple realized this was more about two kids fighting in the sandbox and they have bigger issues ahead with 5G and iPhone softness versus battling Qualcomm in court," wrote Daniel Ives, managing director for equity research at Wedbush Securities, in a note to investors. "This also removes uncertainty with Apple as the company now needs to move forward and focus on 5G front and center with Qualcomm in the rearview mirror."

Apparently sensing the implications of the settlement, Intel quickly said Tuesday that it will exit the 5G smartphone modem chip business.

According to reports, Intel had been the only 5G modem supplier for the 2020 iPhones but had missed upcoming deadlines this summer for delivering sample parts of its 5G modem. Fast Company reported earlier this month that Apple had "lost confidence in Intel to deliver the chip."

In addition, following news of the settlement, Nikkei Asian Review reported that Apple will in fact buy 5G modem chips from Qualcomm for 2020 iPhones. Apple and Qualcomm did not immediately respond to the report.

The settlement was announced as court proceedings began this week over a lawsuit filed by Apple in 2017 that accused Qualcomm of using its dominant position in the smartphone modem market to charge high licensing fees for use of its modems in iPhones. The lawsuit had triggered multiple legal disputes, including allegations by Qualcomm last year that Apple stole Qualcomm's trade secrets.

Marco Nielsen, vice president of managed mobility services at Stratix, a Norcross, Ga.-based MSP, said he was "shocked that they have settled after so many years."

"With the other announcement from Intel that they are stopping their 5G chipset and exiting that market, I think it's clear that Apple had to pick one or the other, instead of the previous two-headed race. Or buy a company that could give them the 5G modem technology," Nielsen said in an email to CRN.

It also seemed unlikely that Samsung and Huawei were open to selling their 5G modems to Apple, Nielsen added.

"Qualcomm was probably the best choice, and they opted to bury the fight," he said. “This should make the usual fall announcements from Apple more interesting.”